Answers only

QUESTION 12

1. You are given the following information for Merrimack, Inc.

Sales240,000

Debt130,000

Dividends5,000

Equity30,000

Interest rate7%

Net income16,000

Tax rate30%

Assume the company has no short-term debt. Also assume that all asset turnover, profit margin, and dividend payout ratios remain constant. (Hint: First prepare income statement working backwards from the bottom to find EBIT.)

1. What is the company's basic earning power (BEP)?
2. A.30.06%
3. B.27.76%
4. C.25.87%
5. D.24.30%
6. E.22.97%
7. F.21.83%
8. G.20.84%
9. H.19.97%

QUESTION 14

1. Your favorite cup of coffee costs $6.50. You buy one cup every day. Starting tomorrow, you stop buying coffee for the next 40 years until you retire. Instead,every dayyou deposit the money saved by not buying coffee into an account that pays 9 percent annual interest rate compounded daily. How much would you have in the account at retirement. Assume all years have 365 days.
2. A.$505,067
3. B.$577,219
4. C.$649,371
5. D.$721,524
6. E.$793,676
7. F.$865,829
8. G.$937,981
9. H.$1,010,133

5 points

QUESTION 15

1. You invest $11,000 into a savings account that pays an annual interest rate of 11.00%, compoundedmonthly. How much would you have in your account after 15 years?
2. A.$32,289
3. B.$37,335
4. C.$41,971
5. D.$46,218
6. E.$50,100
7. F.$53,636
8. G.$56,848
9. H.$59,753

5 points

QUESTION 16

1. Lowell Riverhawk Corporation has a total debt to assets ratio of 70.0 percent. Its net income last year was $25,000. If the total debt was $200,000, what was the return on equity (ROE)?
2. A.18.75%
3. B.20.83%
4. C.23.21%
5. D.25.96%
6. E.29.17%
7. F.32.95%
8. G.37.50%
9. H.43.06%

5 points

QUESTION 17

1. Last year, BFA Corporation had net sales of $3,850,000 and cost of goods sold of $2,000,000. Its depreciation charge was $600,000 and selling, general, and administrative (SG&A) expense was $800,000. If the interest charge was $30,000 and the tax rate is 35 percent, what was the operating cash flow? Ignore any carry back or carry forward of loss for tax purposes.
2. A.$675,500
3. B.$708,000
4. C.$740,500
5. D.$773,000
6. E.$805,500
7. F.$838,000
8. G.$870,500
9. H.$903,000

5 points

QUESTION 18

1. You purchased a rare baseball card for $10,000 as an investment.Five years later you accidentally spilled coffee on it while working on your finance exam and were forced to sell it for $5,000.What rate of return did you earn? (Hint: It is negative!)
2. A.-12.94%
3. B.-11.27%
4. C.-9.71%
5. D.-8.25%
6. E.-6.89%
7. F.-5.59%
8. G.-4.36%
9. H.-3.20%

5 points

QUESTION 19

1. Hilarious Profits, Inc. (HPI) earned a profit of 20% on sales of $30,000,000. Its balance sheet shows total assets of $10,000,000. If HPI wants to achieve a Total Asset Turnover of 4.3, what should be thepercent increase in salesfrom the current level assuming no change in assets? (Answers are rounded)
2. A.50%
3. B.47%
4. C.43%
5. D.40%
6. E.37%
7. F.33%
8. G.30%
9. H.27%

5 points

QUESTION 20

1. Olney Science Corporation has total assets of $275,000 and total debt of $100,000. If it has 40,000 shares outstanding, what is the book value per share?
2. A.$3.75
3. B.$4.38
4. C.$5.00
5. D.$5.63
6. E.$6.25
7. F.$6.88
8. G.$7.50
9. H.$8.13

5 points

QUESTION 21

1. More Profits, Inc. (MPI) earned a profit of 20% on sales of $20,000,000. Its balance sheet shows total assets of $8,000,000. What is the Total Asset Turnover ratio for MPI?
2. A.3.00
3. B.2.88
4. C.2.75
5. D.2.63
6. E.2.50
7. F.2.38
8. G.2.25
9. H.2.13